Along with many of the other threads, I would like to comment on the following issue: Would hyperinflation automatically cause a declining equity market? Hyperinflation and deflation are both predictive of stock market crashes. Witness 1923 Germany and the Nikkei Crash in Japan. As increased money supply finds its way into the equity markets, the prices should rise. With progressive devaluation of the currency, there is a need to place money into the equity markets (and avoid the bond markets) to avoid devaluation of one's wealth by doing nothing. Hence, the long term maxim that the equity markets are an inflation hedge of sorts. Even in hyperinflation, it appears that equity markets rise dramatically (although not sufficiently in relationship to the devaluation of the currency). So, for a while, you feel wealthy, but you are really not. I don't want to plagarize, so here are some useful articles you might want to read: http://www.gold-eagle.com/gold_digest_04/blumen092104.html http://www.gold-eagle.com/editorials_02/taylorb121402.html http://www.ameinfo.com/83176.html This material was very interesting. Does anyone here have access to a chart of the german stock market during 1915-1925? It would be very useful to see what happened & I have not yet been able to locate one.
Good analysis. I think slowly but surely more individuals are coming around to this angle of thought. i.e., equity prices staying well bid in case of, or in anticipation of, the dollar devaluation. Let's face it, there are days in this market where every single asset class has a bid. IMO, if you are looking beneath the surface, you are recognizing the fact that it's a desperate move away from holding cash. What makes this worse is the simple fact that the Fed and their cronies will jawbone out of both sides of their mouth so that the specs are constantly trapped in between speculating on a hawkish Fed and/or an accomadative Fed that will let the dollar slide into the abyss and foster a hyperinflationary environment. So far, odds have definitely been in favor of a hyperinflationary blow off with equity prices benefiting from the future anticipation of the stealth dollar devaluation.
Thanks for posting that chart, from the way I see that data - we're not even at historic lows on volitility yet so it can get much worse. Furthermore, it seems we're right at the historical average for annual volitility which seems to be about 10% for the DOW. Am I wrong? I'd also like to add that trendiness is far more important than volitility to me. I rather have a readable and trendy market even with small ranges with daily-weekly-monthly closes far away from the open than a volitile market with a lot of choppiness to it.
i hate to be a pessimist but it seems to me that the US has not yet paid the price for the party in the late 90's. With a negative savings rate and out of control spending the US is due for its day of reckoning. With oil at $75 and the analysts telling us there is no inflation worries something is very wrong. I hope for the best but at this point I would expect the US economy to get worse.
I hate to play Devil's Advocate here but I want to give the doomsayers of the past 18months or so some more scope to look around for reasons why the bullish nature of global equities doesn't necessarily have to be all hype and that the billions of billions that gets invested globally everyday isn't necessarily done so by stupid people with you guys being the sane ones who see it as a load of 'smoke and mirrors' Firstly, people tend to forget, even just a handful of years after the event, just how bad severe market corrections are. I'm not focusing on US equities/economics specifically here but just take a look how long it has taken the DJ to recouperate from the mini nightmare at the teurn of the millenium. I think this is a case where people would rather not get burnt by watchiing their investment go to the moon, only to watch it come crashing back, which blindsides you from making any money. I suppose this is just the same as the old 'climbing the wall of worry' phrase. Basically, all I am trying to say here is that people waste too much time saying 'this wont last' because they are subconsciously harbouring reminders of 1987/2000 which prevents you from even contemplating that this run up in equities is a) no historical freak or over-reaction compared to prior market runs b) might have genuine merit Secondly, getting onto the genuine merit part from above.... I want to offer you the following food for thought (and none of this is any indication of my bias) which may make you think twice about continually trying to pick tops or tell the rest of the world that they have gone mad: 1. Economic/Industrial Expansion in present day gives fair reasoning for bullish equities. When the US went through its economic expansion phase, you guys had almost a decade of happy times where you couldn't lose money if you tried. Same too for Japan. Now, when you add the population of Japan and the US together you end up with about 3.7% of global population. If you add together the population of China and India (and ignore the fact that Japan is now back on the agenda also) you get somewhere near 40% of global population. That's a lot of roads to build, buildings to construct, mouths to feed, cheap labour coming online.... blah blah blah.... and in 20 years, they will be employing you to sew up footballs and they will be buying Apple Macs by the batchload. 2. Yes oil is important but the 'developed world' is not nearly as dependent upon it as back in the 70s so can you hand on heart say that $70-$100 fuel will break the bank for average Joe and result in inflation...... Jury still out on that to be honest, and 'second round affects' still to be pushed through even after 1yr+ of the world moaning about expensive oil. 3. If you had $1bn and you had to hide it in an asset somewhere, the menu of property v fixed interest v equities still points toward equities as the best performing asset i.e. that makes it not overpriced. Agreed, if interest rates start going much higher you might find bonds becoming more popular but you simply can't say that this is a likely scenario........ the bond market, full of the biggest players in the world don't think it will happen so why do you? I know I am rabbling here but every time I hear about twin deficits and inflation, the same one sided story comes out i.e. the world has gone mad, and I think people need to start looking at the other side of the equation before smugly sitting back for another 3 years of market gains thinking they are right to stay out! Again, the above is not my opinion, it's just what I see as the flipside to the constant one-sided arguments I see on here.
Is the glass half empty or half full? I do think the market headwinds are building up.....the bull run has been great it is time for a correction. Question is how big will the correction be 5%, 10%, or maybe even 20%.
it's been 4 years sinnce the dow's corrected 10% i read in an article. it's the longest peiod in history to go without a 10% correction. it's been years since i even worried at night i'd wake up int he morning and the futures woul be down 25 pts. complacency is massive. but it's bene like that for years
I love 100% up room to go!! Except............... check the last time the SPX had a -2% down day..... then check the longest time the SPX has ever gone without a -2% down day.... Ye shall be surprised.....
dumb comment of the day: "all the markets in the world have been in parabolic runs for years. now it's time to end the nonsense" lol ALL? fwiw, nikkei which has been phenomenal RECENTLY has been SUCKY for years. just one example